FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

              (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT of 1934

                  For the quarterly period ended June 30, 2004
--------------------------------------------------------------------------------

                                       OR

             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT of 1934

For the transition period from _______________________ to ______________________


                             Commission file number
                                     0-21560
                     ---------------------------------------


                            CNL Income Fund XI, Ltd.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Florida                                       59-3078854
-------------------------------               ----------------------------------
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                       Identification No.)


        450 South Orange Avenue
            Orlando, Florida                                 32801
----------------------------------------      ----------------------------------
(Address of principal executive offices)                   (Zip Code)


Registrant's telephone number
(including area code)                                    (407) 540-2000
                                              ----------------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  13 or 15(d)  of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No _________

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act): Yes___ No X

<PAGE>

                                    CONTENTS



                                                                           Page
Part I.

     Item 1.      Financial Statements:

                      Condensed Balance Sheets                             1

                      Condensed Statements of Income                       2

                      Condensed Statements of Partners' Capital            3

                      Condensed Statements of Cash Flows                   4

                      Notes to Condensed Financial Statements              5-6

     Item 2.      Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                  7-9

     Item 3.      Quantitative and Qualitative Disclosures About
                      Market Risk                                          10

     Item 4.      Controls and Procedures                                  10

Part II.

     Other Information                                                     11-12

<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C>

                                                                June 30,            December 31,
                                                                  2004                  2003
                                                           ------------------    ------------------
                               ASSETS

   Real estate properties with operating leases, net       $      20,222,297     $      20,452,460
   Net investment in direct financing leases                       3,702,734             3,768,877
   Real estate held for sale                                         672,023             3,101,531
   Investment in joint ventures                                    3,950,826             3,885,112
   Cash and cash equivalents                                       4,555,515             1,682,358
   Receivables, less allowance for doubtful accounts
       of $165,218 and $131,618, respectively                             --               164,328
   Accrued rental income                                           1,332,287             1,351,304
   Other assets                                                      137,978               161,335
                                                           ------------------    ------------------

                                                           $      34,573,660     $      34,567,305
                                                           ==================    ==================

                  LIABILITIES AND PARTNERS' CAPITAL

   Accounts payable and accrued expenses                   $          22,404     $           8,301
   Real estate taxes payable                                          24,729                25,656
   Distributions payable                                             875,006               875,006
   Due to related parties                                             25,564                16,161
   Rents paid in advance and deposits                                 90,331               196,648
                                                           ------------------    ------------------
       Total liabilities                                           1,038,034             1,121,772

   Minority interests                                              1,198,642             1,209,913

   Partners' capital                                              32,336,984            32,235,620
                                                           ------------------    ------------------

                                                           $      34,573,660     $      34,567,305
                                                           ==================    ==================
</TABLE>

           See accompanying notes to condensed financial statements.

                                       1
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                         CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
<S> <C>

                                                            Quarter Ended                    Six Months Ended
                                                               June 30,                          June 30,
                                                         2004             2003             2004             2003
                                                    --------------   --------------   --------------   --------------
Revenues:
    Rental income from operating leases             $     628,043    $     583,065    $   1,252,401    $   1,213,232
    Earned income from direct financing leases            132,196          137,598          265,830          286,235
    Contingent rental income                               14,979            1,527           39,361            2,831
    Interest and other income                               3,548            3,473           16,652            8,310
                                                    --------------   --------------   --------------   --------------
                                                          778,766          725,663        1,574,244        1,510,608
                                                    --------------   --------------   --------------   --------------

Expenses:
    General operating and administrative                   92,824           60,926          186,515          138,349
    Property related                                       10,968           13,327           20,997           17,567
    Management fees to related party                        9,034           11,871           18,535           19,490
    State and other taxes                                      --            4,351           67,564           50,678
    Depreciation and amortization                         119,962          112,857          236,726          221,550
    Provision for write-down of assets                         --           67,694               --           67,694
                                                    --------------   --------------   --------------   --------------
                                                          232,788          271,026          530,337          515,328
                                                    --------------   --------------   --------------   --------------
Income before minority interests and equity in
    earnings of unconsolidated joint ventures             545,978          454,637        1,043,907          995,280

Minority interests                                        (32,204)         (30,716)         (56,660)         (54,850)

Equity in earnings of unconsolidated joint
    ventures                                               86,047           75,443          171,734          150,886
                                                    --------------   --------------   --------------   --------------

Income from continuing operations                         599,821          499,364        1,158,981        1,091,316
                                                    --------------   --------------   --------------   --------------
Discontinued operations:
    Income from discontinued operations                    20,285           80,360           74,422          180,563
    Gain on disposal of discontinued operations                --               --          617,973          377,961
                                                    --------------   --------------   --------------   --------------
                                                           20,285           80,360          692,395          558,524
                                                    --------------   --------------   --------------   --------------

Net income                                          $     620,106    $     579,724    $   1,851,376    $   1,649,840
                                                    ==============   ==============   ==============   ==============

Income per limited partner unit:
    Continuing operations                           $        0.15    $        0.12   $         0.29    $        0.27
    Discontinued operations                                  0.01             0.02             0.17             0.14
                                                    --------------   --------------  ---------------   --------------
                                                    $        0.16    $        0.14   $         0.46    $        0.41
                                                    ==============   ==============  ===============   ==============

Weighted average number of limited partner
    units outstanding                                  4,000,000         4,000,000          4,000,000        4,000,000
                                                    =============    ==============  =================  ===============
</TABLE>

           See accompanying notes to condensed financial statements.

                                       2
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                    CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
<S> <C>

                                                Six Months Ended         Year Ended
                                                    June 30,            December 31,
                                                      2004                  2003
                                               ------------------    ------------------

General partners:
    Beginning balance                          $         242,465     $         242,465
    Net income                                                --                    --
                                               ------------------    ------------------
                                                         242,465               242,465
                                               ------------------    ------------------

Limited partners:
    Beginning balance                                 31,993,155            32,292,730
    Net income                                         1,851,376             3,200,449
    Distributions ($0.44 and $0.88 per
       limited partner unit, respectively)            (1,750,012)           (3,500,024)
                                               ------------------    ------------------
                                                      32,094,519            31,993,155
                                               ------------------    ------------------

Total partners' capital                        $      32,336,984     $      32,235,620
                                               ==================    ==================
</TABLE>

           See accompanying notes to condensed financial statements.

                                       3
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                       CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C>

                                                                 Six Months Ended
                                                                     June 30,
                                                              2004              2003
                                                         --------------    --------------


Net cash provided by operating activities                $   1,649,921     $   1,866,801
                                                         --------------    --------------

Cash flows from investing activities:
    Proceeds from sale of assets                             3,041,179           931,858
                                                         --------------    --------------
          Net cash provided by investing activities          3,041,179           931,858
                                                         --------------    --------------

Cash flows from financing activities:
    Distributions to limited partners                       (1,750,012)       (1,950,012)
    Distributions to holders of minority interests             (67,931)          (59,845)
                                                         --------------    --------------
          Net cash used in financing activities             (1,817,943)       (2,009,857)
                                                         --------------    --------------

Net increase in cash and cash equivalents                    2,873,157           788,802

Cash and cash equivalents at beginning of period             1,682,358         1,777,200
                                                         --------------    --------------

Cash and cash equivalents at end of period               $   4,555,515     $   2,566,002
                                                         ==============    ==============

Supplemental schedule of non-cash financing
    activities:

    Distributions declared and unpaid at end of
       period                                            $     875,006     $     875,006
                                                         ==============    ==============
</TABLE>

           See accompanying notes to condensed financial statements.

                                       4
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
              Quarters and Six Months Ended June 30, 2004 and 2003


1.       Basis of Presentation

         The accompanying  unaudited  condensed  financial  statements have been
         prepared in accordance  with the  instructions  to Form 10-Q and do not
         include  all  of the  information  and  note  disclosures  required  by
         generally  accepted  accounting  principles.  The financial  statements
         reflect all adjustments,  consisting of normal  recurring  adjustments,
         which are, in the opinion of the general partners, necessary for a fair
         statement of the results for the interim periods  presented.  Operating
         results for the  quarter and six months  ended June 30, 2004 may not be
         indicative  of the  results  that may be  expected  for the year ending
         December  31, 2004.  Amounts as of December  31, 2003,  included in the
         financial   statements,   have  been  derived  from  audited  financial
         statements as of that date.

         These unaudited financial statements should be read in conjunction with
         the financial statements and notes thereto included in Form 10-K of CNL
         Income Fund XI, Ltd. (the  "Partnership")  for the year ended  December
         31, 2003.

         The Partnership  accounts for its 85% interest in Denver Joint Venture,
         its 77.33% interest in CNL/Airport  Joint Venture,  its 62.16% interest
         in Ashland Joint  Venture,  and its 76.60%  interest in Des Moines Real
         Estate Joint Venture using the consolidation method. Minority interests
         represent the minority joint venture partners'  proportionate  share of
         the equity in the joint ventures. All significant intercompany accounts
         and transactions have been eliminated.

         In December 2003,  the Financial  Accounting  Standards  Board issued a
         revision to FASB  Interpretation  No. 46 (originally  issued in January
         2003)  ("FIN  46R"),  "Consolidation  of  Variable  Interest  Entities"
         requiring  existing  unconsolidated  variable  interest  entities to be
         consolidated by their primary beneficiaries. The primary beneficiary of
         a variable  interest entity is the party that absorbs a majority of the
         entity's expected losses,  receives a majority of its expected residual
         returns, or both, as a result of holding variable interests,  which are
         the ownership,  contractual,  or other pecuniary interests in an entity
         that change with  changes in the fair value of the  entity's net assets
         excluding  variable  interests.  Prior to FIN 46R, a company  generally
         included  another  entity  in  its  financial  statements  only  if  it
         controlled the entity through voting interests.  Application of FIN 46R
         is  required  in  financial  statements  of public  entities  that have
         interests in variable  interest entities for periods ending after March
         15,  2004.  The  Partnership  adopted FIN 46R during the quarter  ended
         March 31,  2004,  which  resulted in the  consolidation  of  previously
         unconsolidated  joint  ventures,  which  were  accounted  for under the
         equity method. FIN 46R does not require, but does permit restatement of
         previously  issued financial  statements.  The Partnership has restated
         prior year's financial statements to maintain comparability between the
         periods presented.  Such  consolidation  resulted in certain assets and
         minority interests,  and revenues and expenses, of these entities being
         reported on a gross basis in the  Partnership's  financial  statements;
         however,  these  restatements had no effect on partners' capital or net
         income.

2.   Reclassification

         Certain  items in the  prior  year's  financial  statements  have  been
         reclassified to conform to 2004 presentation.  These  reclassifications
         had no effect on total partners' capital or net income.

                                       5
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
              Quarters and Six Months Ended June 30, 2004 and 2003

3.       Discontinued Operations

         During 2003, the  Partnership  identified four properties for sale that
         were  classified  as  discontinued   operations  in  the   accompanying
         financial  statements.  The  Partnership  sold the property in Abilene,
         Texas,  during  2003.  During the  quarter  ended March 31,  2004,  the
         Partnership sold its property in Lynchburg,  Virginia to the tenant and
         sold its  Properties  in  Cullman,  Alabama,  and  Huntersville,  North
         Carolina,  to separate third parties,  and received aggregate net sales
         proceeds of approximately  $3,041,000,  resulting in a gain on disposal
         of discontinued  operations of approximately  $618,000. The Partnership
         recorded  a  provision  for  write-down  of assets in a  previous  year
         related to the property in Lynchburg, Virginia.

         In May  2004,  the  Partnership  identified  for sale the  property  in
         Dothan,  Alabama  and  reclassified  the asset to real  estate held for
         sale.  Because the current  carrying  amount of this asset is less than
         its fair value less cost to sell,  no provision  for the  write-down of
         assets was recorded.

         The  following  presents  the  operating  results  of the  discontinued
         operations for these properties:
<TABLE>
<CAPTION>
<S> <C>
                                                   Quarter Ended                    Six Months Ended
                                                      June 30,                          June 30,
                                                2004             2003             2004             2003
                                           --------------   --------------   --------------   --------------

              Rental revenues              $      20,285    $      81,560    $      74,422    $     185,248
              Expenses                                --           (1,200)              --           (4,685)
                                           --------------   --------------   --------------   --------------
              Income from
                  discontinued operations  $      20,285    $      80,360    $      74,422    $     180,563
                                           ==============   ==============   ==============   ==============
</TABLE>

4.       Subsequent Event

         On August 9, 2004, the Partnership entered into a definitive  Agreement
         and Plan of Merger  pursuant  to which the  Partnership  will be merged
         with a subsidiary of U.S. Restaurant Properties,  Inc. (NYSE: USV). The
         merger is one of multiple concurrent  transactions pursuant to which 17
         other  affiliated  limited  partnerships  also  will be  merged  with a
         subsidiary  of  U.S.  Restaurant  Properties,  Inc.  and in  which  CNL
         Restaurant  Properties,  Inc., an  affiliate,  also will be merged with
         U.S.  Restaurant  Properties,  Inc.  CNL  Restaurant  Properties,  Inc.
         currently  provides  property  management  and  other  services  to the
         Partnership.  The merger of the  Partnership  (and each of the 17 other
         affiliated mergers) is subject to certain conditions including approval
         by a majority of the limited partners, consummation of a minimum number
         of limited partnership mergers representing at least 75.0% in value (as
         measured  by the  value of the  merger  consideration)  of all  limited
         partnerships,  consummation  of the  merger  between  U. S.  Restaurant
         Properties,  Inc. and CNL Restaurant Properties,  Inc., approval of the
         shareholders of U.S. Restaurant  Properties,  Inc., and availability of
         financing.  The  transaction is expected to be consummated in the first
         quarter of 2005.

         Under the terms of the  transaction,  the limited partners will receive
         total  consideration  of  approximately  $39.66 million,  consisting of
         approximately $33.16 million in cash and approximately $6.50 million in
         U.S. Restaurant  Properties,  Inc. Series A Convertible Preferred Stock
         that is listed on the New York Stock  Exchange.  The  general  partners
         will receive total  consideration of approximately  $197,000 consisting
         of  approximately   $165,000  in  cash  and  approximately  $32,000  in
         preferred stock.

                                       6
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         CNL Income Fund XI, Ltd. (the  "Partnership,"  which may be referred to
as "we," "us," or "our") is a Florida limited  partnership that was organized on
August 20, 1991 to acquire for cash,  either  directly or through  joint venture
arrangements,  both  newly  constructed  and  existing  restaurants,  as well as
properties upon which  restaurants  were to be constructed  (the  "Properties"),
which are leased  primarily to operators of national and regional  fast-food and
family-style  restaurant chains. The leases are, in general,  triple-net leases,
with the lessees  responsible for all repairs and  maintenance,  property taxes,
insurance,  and utilities. We owned 28 and 31 Properties directly as of June 30,
2004 and 2003,  respectively.  We also owned ten and eight Properties indirectly
through joint venture or tenancy in common  arrangements as of June 30, 2004 and
2003, respectively.

Capital Resources

         Net cash provided by operating activities was $1,649,921 and $1,866,801
for the six months ended June 30, 2004 and 2003,  respectively.  The decrease in
net cash provided by operating  activities  during the six months ended June 30,
2004,  was a result of changes  in our  working  capital,  such as the timing of
transactions  relating  to the  collection  of  receivables  and the  payment of
expenses, and changes in income and expenses, such as changes in rental revenues
and changes in operating and property related expenses.

         Other sources and uses of cash  included the  following  during the six
months ended June 30, 2004.

         In 2004, we sold our Property in Lynchburg,  Virginia to the tenant and
sold our Properties in Cullman,  Alabama, and Huntersville,  North Carolina,  to
separate third parties,  and received aggregate net sales proceeds of $3,041,000
resulting  in a gain on disposal of  discontinued  operations  of  approximately
$618,000.  We recorded a provision  for  write-down of assets in a previous year
related to the Property in Lynchburg,  Virginia.  The general partners intend to
reinvest the net sales proceeds in additional Properties or to pay liabilities.

         Cash and cash  equivalents  increased to  $4,555,515  at June 30, 2004,
from $1,682,358 at December 31, 2003. At June 30, 2004, these funds were held in
demand deposit accounts at a commercial bank and a certificate of deposit with a
90-day or less maturity date. The increase in cash and cash  equivalents at June
30, 2004 was primarily a result of holding sales  proceeds from the current year
sales.  The funds remaining at June 30, 2004, after the payment of distributions
and other  liabilities,  may be used to invest in additional  Properties  and to
meet our working capital needs.

Short-Term Liquidity

         Our  investment  strategy of acquiring  Properties for cash and leasing
them under triple-net leases to operators who generally meet specified financial
standards  minimizes our operating  expenses.  The general partners believe that
the leases will generate net cash flow in excess of operating expenses.

         Our  short-term   liquidity   requirements  consist  primarily  of  our
operating expenses.

         The general  partners have the right,  but not the obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
our operations.

         We  generally  distribute  cash  from  operations  remaining  after the
payment of operating expenses, to the extent that the general partners determine
that such funds are available for distribution. Based on current and anticipated
future cash from  operations,  we declared  distributions to limited partners of
$1,750,012 for each of the six months ended June 30, 2004 and 2003 ($875,006 for
each  of  the  quarters  ended  June  30,  2004  and  2003).   This   represents
distributions  of $0.44 per unit for each of the six months  ended June 30, 2004
and 2003 ($0.22 for each applicable quarter).  No distributions were made to the
general  partners for  quarters and six months ended June 30, 2004 and 2003.  No
amounts  distributed  to the limited  partners for the six months ended June 30,
2004 and 2003 are required to be or have been treated as a return of capital for
purposes of calculating the limited  partners'  return on their adjusted capital
contributions.  We  intend  to  continue  to make  distributions  of cash to the
limited partners on a quarterly basis.

                                       7
<PAGE>

         Total  liabilities,   including  distributions  payable,  decreased  to
$1,038,034 at June 30, 2004 from  $1,121,772 at December 31, 2003.  The decrease
in total liabilities was due to a decrease in rents paid in advance and deposits
and was partially offset by an increase in accounts payable and accrued expenses
and amounts due to related  parties.  The general  partners believe that we have
sufficient cash on hand to meet our current working capital needs.

Long Term Liquidity

         We have no long-term debt or other long-term liquidity requirements.

Results of Operations

         Rental revenues from continuing  operations were $1,518,231 for the six
months  ended June 30,  2004,  as compared to  $1,499,467  in the same period in
2003, of which  $760,239 and $720,663 were earned during the second  quarters of
2004 and 2003,  respectively.  Rental revenues from  continuing  operations were
higher during the six months and quarter ended June 30, 2004 because we provided
a rent  reduction  to the tenant of the  Property in Yelm,  Washington  when the
tenant experienced financial  difficulties in 2002. In March 2003, we executed a
termination  of the  tenant's  lease  rights,  and the  tenant  surrendered  the
premises.  The restaurant  operated under a temporary lease agreement with a new
tenant  until  October  2003  when  we  entered  into  a new  lease  with  terms
substantially  the same as our other leases.  The increase during the six months
ended June 30,  2004 was  partially  offset due to the fact that  during 2003 we
stopped recording rental revenues relating to the Property in Dayton,  Ohio when
the tenant  experienced  financial  difficulties.  During March 2004, the tenant
vacated  the  Property.  In July 2004,  we  entered  into a new lease with a new
tenant for the Property. We began receiving rental payments in August 2004.

         In April 2003, a tenant, The Melodie Corporation, filed for bankruptcy.
The tenant  has  neither  affirmed  nor  rejected  the one lease it has with us.
Subsequent  to the tenant filing for  bankruptcy,  we have  continued  receiving
rental payments  relating to this lease.  The lost revenues that would result if
the lease  were to be  rejected  will have an adverse  effect on the  results of
operations if we are not able to re-lease the Property in a timely manner.

         During the six months ended June 30, 2004 and 2003,  we earned  $39,361
and $2,831,  respectively,  in contingent  rental income from our Properties and
our consolidated joint ventures,  of which $14,979 and $1,527 were earned during
the second quarters of 2004 and 2003,  respectively.  The increase in contingent
rental income during 2004 was due to an increase in reported  gross sales of the
restaurants with leases that require the payment of contingent rental income.

         During the six months ended June 30, 2004 and 2003, we earned  $171,734
and $150,886, respectively,  attributable to net income earned by unconsolidated
joint  ventures,  of which  $86,047  and $75,443  were earned  during the second
quarters of 2004 and 2003,  respectively.  The increase in 2004 is the result of
an investment in an additional tenancy in common relationship in November 2003.

         Operating  expenses,  including  depreciation  and  amortization,  were
$530,337  and  $515,328  during  the six months  ended  June 30,  2004 and 2003,
respectively,  of which  $232,788 and $271,026 were  incurred  during the second
quarters of 2004 and 2003,  respectively.  The  increase in  operating  expenses
during  the six months  ended  June 30,  2004 was  primarily  due to  additional
general  operating and  administrative  expenses,  including  legal fees, and an
increase  in state tax expense  relating  to several  states in which we conduct
business  offset by recording  of a provision  for the  write-down  of assets in
2003.  Operating  expenses  were higher  during the quarter ended June 30, 2003,
compared to 2004,  due to the  recording of a provision  for the  write-down  of
assets  relating  to the  Property in Yelm,  Washington,  which was offset by an
increase in the general operating and administrative expenses during 2004.

         We recognized income from discontinued operations (rental revenues less
property  related  expenses) of $180,563  and $80,360  during the six months and
quarter  ended  June 30,  2003,  respectively,  relating  to the  Properties  in
Abilene,  Texas,  Lynchburg  Virginia,  Cullman,  Alabama,  Huntersville,  North
Carolina,  and Dothan,  Alabama. We sold the Property in Abilene, Texas in March
2003  resulting  in a  gain  on  the  disposal  of  discontinued  operations  of
approximately  $378,000.  During the six months and quarter ended June 30, 2004,
we  recognized  income from  discontinued  operations  of $74,422  and  $20,285,

                                       8
<PAGE>

respectively,  relating  to  the  Properties  in  Lynchburg  Virginia,  Cullman,
Alabama, Huntersville, North Carolina, and Dothan, Alabama. In 2004, we sold the
Property in Lynchburg,  Virginia,  to the tenant and the  Properties in Cullman,
Alabama, and Huntersville,  North Carolina,  to separate third parties resulting
in a gain on disposal of discontinued  operations of approximately  $618,000. As
of  August  9,  2004,  the sale of the  Property  in  Dothan,  Alabama,  had not
occurred.

         In December 2003,  the Financial  Accounting  Standards  Board issued a
revision to FASB Interpretation No. 46 (originally issued in January 2003) ("FIN
46R"),   "Consolidation  of  Variable  Interest  Entities,"  requiring  existing
unconsolidated  variable  interest  entities to be consolidated by their primary
beneficiaries.  The primary  beneficiary  of a variable  interest  entity is the
party that  absorbs a  majority  of the  entity's  expected  losses,  receives a
majority  of its  expected  residual  returns,  or both,  as a result of holding
variable  interests,  which are the ownership,  contractual,  or other pecuniary
interests  in an  entity  that  change  with  changes  in the fair  value of the
entity's net assets excluding  variable  interests.  Prior to FIN 46R, a company
generally  included  another  entity  in its  financial  statements  only  if it
controlled  the  entity  through  voting  interests.  Application  of FIN 46R is
required in  financial  statements  of public  entities  that have  interests in
variable  interest  entities for periods ending after March 15, 2004. We adopted
FIN 46R  during  the  quarter  ended  March  31,  2004,  which  resulted  in the
consolidation of previously unconsolidated joint ventures, Ashland Joint Venture
and Des Moines Real Estate Joint Venture, both of which were accounted for under
the equity  method.  FIN 46R does not require,  but does permit  restatement  of
previously  issued  financial  statements.  We restated  prior year's  financial
statements  to  maintain  comparability  between  the  periods  presented.  Such
consolidation  resulted in certain assets and minority  interests,  and revenues
and expenses, of these entities being reported on a gross basis in our financial
statements;  however,  these  restatements had no effect on partner's capital or
net income.

         The general  partners  believe their  primary  objective is to maintain
current operations with restaurant operators as successfully as possible,  while
evaluating  strategic  alternatives,  including  alternatives  that may  provide
liquidity to the limited  partners.  Real estate  markets are strong  throughout
much of the nation,  and the performance of restaurants  has generally  improved
after several  challenging years. As a result, the general partners believe that
this is an attractive  period for a strategic event to monetize the interests of
the limited partners.

         In furtherance of this, on August 9, 2004, we entered into a definitive
Agreement  and  Plan of  Merger  pursuant  to  which  we will be  merged  with a
subsidiary of U.S. Restaurant Properties, Inc. (NYSE: USV). The merger is one of
multiple concurrent  transactions  pursuant to which 17 other affiliated limited
partnerships  also  will  be  merged  with  a  subsidiary  of  U.S.   Restaurant
Properties,  Inc. and in which CNL  Restaurant  Properties,  Inc., an affiliate,
also will be merged with U.S. Restaurant  Properties,  Inc. Our merger (and each
of the 17 other affiliated  mergers) is subject to certain conditions  including
approval by a majority of the limited partners, consummation of a minimum number
of limited partnership mergers representing at least 75.0% in value (as measured
by  the  value  of  the  merger  consideration)  of  all  limited  partnerships,
consummation  of the merger between U. S.  Restaurant  Properties,  Inc. and CNL
Restaurant  Properties,  Inc.,  approval of the shareholders of U.S.  Restaurant
Properties,  Inc., and availability of financing.  U.S.  Restaurant  Properties,
Inc.  is a real  estate  investment  trust  (REIT)  that  focuses  primarily  on
acquiring, owning and leasing restaurant properties. The transaction is expected
to be consummated in the first quarter of 2005.

         Under the terms of the  transaction,  our limited partners will receive
total consideration of approximately $39.66 million, consisting of approximately
$33.16  million  in cash and  approximately  $6.50  million  in U.S.  Restaurant
Properties,  Inc. Series A Convertible Preferred Stock that is listed on the New
York Stock Exchange.  The general  partners will receive total  consideration of
approximately   $197,000  consisting  of  approximately  $165,000  in  cash  and
approximately $32,000 in preferred stock.

         We received an opinion from Wachovia  Capital  Markets,  LLC that as of
August 9, 2004 the merger  consideration  to be  received  by the holders of our
general and limited  partnership  interests is fair,  from a financial  point of
view, to such holders.

         As reflected  above, the  contemplated  transactions  are complex,  and
contingent upon certain conditions. The restaurant marketplace,  the real estate
industry,  and the equities markets, all individually or taken as a whole, could
impact the  economics of this  transaction.  As a result,  there is no assurance
that we will be successful in completing the contemplated transaction.

                                       9
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable.


ITEM 4.  CONTROLS AND PROCEDURES

         The  general  partners  maintain  a  set  of  disclosure  controls  and
procedures  designed to ensure that information  required to be disclosed in our
filings  under  the  Securities  Exchange  Act of 1934 is  recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission's  rules and forms.  The principal  executive and financial
officers of the corporate general partner have evaluated our disclosure controls
and procedures as of the end of the period  covered by this Quarterly  Report on
Form 10-Q and have determined  that such disclosure  controls and procedures are
effective.

         There was no change in internal  control over financial  reporting that
occurred during the most recent fiscal quarter that has materially affected,  or
is  reasonably  likely to materially  affect,  internal  control over  financial
reporting.


                                       10
<PAGE>

                           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings.   Inapplicable.
         -----------------

Item 2.  Changes in Securities.  Inapplicable.
         ---------------------

Item 3.  Defaults upon Senior Securities.  Inapplicable.
         -------------------------------

Item 4.  Submission of Matters to a Vote of Security Holders.  Inapplicable.
         ---------------------------------------------------

Item 5.  Other Information.  Inapplicable.
         -----------------

Item 6.  Exhibits and Reports on Form 8-K.
         --------------------------------

         (a)  Exhibits

              3.1  Affidavit  and  Certificate  of  Limited  Partnership  of CNL
                   Income Fund XI, Ltd. (Included as Exhibit 3.2 to Registration
                   Statement No. 33-43278 on Form S-11 and  incorporated  herein
                   by reference.)

              4.1  Affidavit  and  Certificate  of  Limited  Partnership  of CNL
                   Income Fund XI, Ltd. (Included as Exhibit 3.2 to Registration
                   Statement No. 33-43278 on Form S-11 and  incorporated  herein
                   by reference.)

              4.2  Amended and Restated Agreement of Limited  Partnership of CNL
                   Income  Fund XI, Ltd.  (Included  as Exhibit 4.2 to Form 10-K
                   filed with the  Securities  and Exchange  Commission on April
                   15, 1993, and incorporated herein by reference.)

              10.1 Management Agreement between CNL Income Fund XI, Ltd. and CNL
                   Investment  Company.  (Included  as Exhibit 10.1 to Form 10-K
                   filed with the  Securities  and Exchange  Commission on April
                   15, 1993, and incorporated herein by reference.)

              10.2 Assignment  of  Management   Agreement  from  CNL  Investment
                   Company  to CNL  Income  Fund  Advisors,  Inc.  (Included  as
                   Exhibit  10.2 to Form  10-K  filed  with the  Securities  and
                   Exchange  Commission  on March  30,  1995,  and  incorporated
                   herein by reference.)

              10.3 Assignment  of  Management  Agreement  from CNL  Income  Fund
                   Advisors,  Inc.  to CNL  Fund  Advisors,  Inc.  (Included  as
                   Exhibit  10.3 to Form  10-K  filed  with the  Securities  and
                   Exchange Commission on April 1, 1996, and incorporated herein
                   by reference.)

              10.4 Assignment of Management  Agreement  from CNL Fund  Advisors,
                   Inc. to CNL APF  Partners,  LP.  (Included as Exhibit 10.4 to
                   Form 10-Q filed with the Securities  and Exchange  Commission
                   on August 14, 2001, and incorporated herein by reference.)

              10.5 Assignment of Management Agreement from CNL APF Partners,  LP
                   to CNL Restaurants  XVIII, Inc.  (Included as Exhibit 10.5 to
                   Form 10-Q filed with the Securities  and Exchange  Commission
                   on August 14, 2002, and incorporated herein by reference.)

                                       11
<PAGE>

              31.1 Certification of Chief Executive Officer of Corporate General
                   Partner  Pursuant  to Rule  13a-14  as  Adopted  Pursuant  to
                   Section  302  of  the  Sarbanes-Oxley  Act  of  2002.  (Filed
                   herewith.)

              31.2 Certification of Chief Financial Officer of Corporate General
                   Partner  Pursuant  to Rule  13a-14  as  Adopted  Pursuant  to
                   Section  302  of  the  Sarbanes-Oxley  Act  of  2002.  (Filed
                   herewith.)

              32.1 Certification of Chief Executive Officer of Corporate General
                   Partner  Pursuant  to  18  U.S.C.  Section  1350  as  Adopted
                   Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002.
                   (Filed herewith.)

              32.2 Certification of Chief Financial Officer of Corporate General
                   Partner  Pursuant  to  18  U.S.C.  Section  1350  as  Adopted
                   Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002.
                   (Filed herewith.)

         (b)  Reports on Form 8-K

              No reports on Form 8-K were filed  during the  quarter  ended June
              30, 2004.

                                       12
<PAGE>

                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

         DATED this 9th day of August 2004.


                                CNL INCOME FUND XI, LTD.

                                By:   CNL REALTY CORPORATION
                                      General Partner


                                      By:   /s/ James M. Seneff, Jr.
                                           -------------------------------------
                                            JAMES M. SENEFF, JR.
                                            Chief Executive Officer
                                            (Principal Executive Officer)


                                      By:   /s/ Robert A. Bourne
                                           -------------------------------------
                                            ROBERT A. BOURNE
                                            President and Treasurer
                                            (Principal Financial and
                                            Accounting Officer)

<PAGE>

                                  EXHIBIT INDEX

Exhibit Number

         (c)  Exhibits

              3.1  Affidavit  and  Certificate  of  Limited  Partnership  of CNL
                   Income Fund XI, Ltd. (Included as Exhibit 3.2 to Registration
                   Statement No. 33-43278 on Form S-11 and  incorporated  herein
                   by reference.)

              4.1  Affidavit  and  Certificate  of  Limited  Partnership  of CNL
                   Income Fund XI, Ltd. (Included as Exhibit 3.2 to Registration
                   Statement No. 33-43278 on Form S-11 and  incorporated  herein
                   by reference.)

              4.2  Amended and Restated Agreement of Limited  Partnership of CNL
                   Income  Fund XI, Ltd.  (Included  as Exhibit 4.2 to Form 10-K
                   filed with the  Securities  and Exchange  Commission on April
                   15, 1993, and incorporated herein by reference.)

              10.1 Management Agreement between CNL Income Fund XI, Ltd. and CNL
                   Investment  Company.  (Included  as Exhibit 10.1 to Form 10-K
                   filed with the  Securities  and Exchange  Commission on April
                   15, 1993, and incorporated herein by reference.)

              10.2 Assignment  of  Management   Agreement  from  CNL  Investment
                   Company  to CNL  Income  Fund  Advisors,  Inc.  (Included  as
                   Exhibit  10.2 to Form  10-K  filed  with the  Securities  and
                   Exchange  Commission  on March  30,  1995,  and  incorporated
                   herein by reference.)

              10.3 Assignment  of  Management  Agreement  from CNL  Income  Fund
                   Advisors,  Inc.  to CNL  Fund  Advisors,  Inc.  (Included  as
                   Exhibit  10.3 to Form  10-K  filed  with the  Securities  and
                   Exchange Commission on April 1, 1996, and incorporated herein
                   by reference.)

              10.4 Assignment of Management  Agreement  from CNL Fund  Advisors,
                   Inc. to CNL APF  Partners,  LP.  (Included as Exhibit 10.4 to
                   Form 10-Q filed with the Securities  and Exchange  Commission
                   on August 14, 2001, and incorporated herein by reference.)

              10.5 Assignment of Management Agreement from CNL APF Partners,  LP
                   to CNL Restaurants  XVIII, Inc.  (Included as Exhibit 10.5 to
                   Form 10-Q filed with the Securities  and Exchange  Commission
                   on August 14, 2002, and incorporated herein by reference.)

              31.1 Certification of Chief Executive Officer of Corporate General
                   Partner  Pursuant  to Rule  13a-14  as  Adopted  Pursuant  to
                   Section  302  of  the  Sarbanes-Oxley  Act  of  2002.  (Filed
                   herewith.)

              31.2 Certification of Chief Financial Officer of Corporate General
                   Partner  Pursuant  to Rule  13a-14  as  Adopted  Pursuant  to
                   Section  302  of  the  Sarbanes-Oxley  Act  of  2002.  (Filed
                   herewith.)

              32.1 Certification of Chief Executive Officer of Corporate General
                   Partner  Pursuant  to  18  U.S.C.  Section  1350  as  Adopted
                   Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002.
                   (Filed herewith.)

              32.2 Certification of Chief Financial Officer of Corporate General
                   Partner  Pursuant  to  18  U.S.C.  Section  1350  as  Adopted
                   Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002.
                   (Filed herewith.)
<PAGE>



                                  EXHIBIT 31.1


<PAGE>



                                  EXHIBIT 31.2


<PAGE>



                                  EXHIBIT 32.1


<PAGE>



                                  EXHIBIT 32.2